ABC v. Aereo: Supreme Court Case Could Change TV Business Model

A case that goes before the U.S. Supreme Court on Tuesday could change how Americans watch TV.

The Washington Post reported that the dispute, American Broadcasting Companies Inc. v. Aereo Inc., pitches a small 2-year-old company called Aereo against ABC, CBS, NBC, and other traditional network giants.

Aereo uses "antenna farms" consisting of thousands of dime-size aerials to capture broadcast television programs, which it then converts into online video streams for subscribers.

The company advertises the service as costing $8 to $12 per month in cities where it currently is available. They include Atlanta, Austin, Baltimore, Boston, Cincinnati, Dallas, Houston, Miami, and New York.

The technology cuts out the cable companies — hence depriving broadcasters of billions of dollars in fees that they are paid by the cable industry in return for the right to transmit content to their subscribers.

The broadcasters allege in the suit that Aereo is stealing their programming.

"Quite simply, Aereo takes copyrighted material, profits from it, and does so without compensating copyright holders," said Gordon Smith, president of the National Association of Broadcasters.

Aereo is arguing that it is entitled to draw freely from programs transmitted on public airwaves.

"Aereo has a shot at changing the TV business model," said Gene Kimmelman, president of the consumer advocacy group Public Knowledge and a former antitrust official at the Justice Department. "Behind the technical and legal arguments of the case is a fundamental question of whether consumers will be able to take advantage of new technology to access programming in a convenient and low-cost fashion."

At the heart of the case is the question of whether Aereo — which is funded by entertainment mogul Barry Diller's Internet company, IAC — violates a copyright law written during the birth of cable television.

The law prohibits the use of copyrighted material broadcast over public airwaves without the approval of — and compensation for — its owner. But it distinguishes between material used for "public" performances, shown to multiple people at once, and "private" performances, shown to a single individual.

Licensing payments are not required for private performances, and Aereo claims it falls into this category.

Newsweek reported that ironically, it was Diller who co-founded Fox TV with Rupert Murdoch. Today, the two billionaires are on opposite sides of the David and Goliath battle.